A progressive take on BC issues

A progressive take on BC issues

I was a bit surprised by Minister Bennett’s statement that I was 100% wrong when I suggested in a CBC radio interview that BC Hydro didn’t need to start on Site C right away. He emphatically disputed the suggestion that the decision and start of construction on Site C could be deferred three to five years without compromising BC Hydro’s ability to reliably meet its requirements.

I was surprised because the only independent review of the need for Site C — an unfortunately limited, but nonetheless careful consideration of BC Hydro’s future requirements by the Site C Joint Environmental Review Panel — made the exact same point.

The Joint Review Panel concluded that “under the low LNG case, [BC Hydro’s] resources could provide adequate capacity and energy until at least 2028”. It went on to state “the Proponent [BC Hydro] has not fully demonstrated the need for the Project on the timetable set forth”.

It isn’t just me, it is the Review Panel that in the Minister’s view must be 100% wrong. And it would also be representatives of every customer group, including large industry, who virtually all agree that starting Site C now (for an in service date in 2023 or 2024) is not needed and unnecessarily costly for ratepayers.

There is a far more cost-effective and prudent way to proceed.

The Minister is quite right, and widely supported by analysts inside and outside of BC Hydro, that Site C is more cost-effective than the mix of run-of-river and wind projects that BC Clean and other IPP advocates would argue for. It is not just that Site C is less costly than run-of-river and wind, it provides a much more valuable source of supply. Unlike wind, Site C provides dependable capacity — the ability to produce electricity exactly when it is needed. And unlike run-of-river resources, the output of Site C can be shaped to the seasons and time of day when it is most needed and valuable.

But to say that Site C is better than those resources does not mean it should proceed at this time.

BC Hydro’s forecasts indicate that what it will need in the short to medium term is more peak generating capacity — the ability to meet all of the system requirements in those specific hours (generally on cold winter days) when with all the electric heating and other loads, total requirements are at their highest levels. What it doesn’t need for many years is what BC Hydro calls annual energy capability — the ability to generate more megawatt hours of electricity over the course of the year.

Put another way, BC Hydro doesn’t need more supply per se, it needs greater ability to produce electricity in the specific hours when needed.

The irony of proceeding with Site C at this time is that while it will provide a lot of both peak generating capacity and annual energy supply, it won’t provide the peak capacity as soon as it is needed, and when Site C does come into service, it will provide much more annual energy supply than is required — energy that will have to be sold at a loss unless the LNG industry takes hold at a scale that no one but the premier is currently expecting, and the LNG plants agree to buy BC Hydro energy supply at the full cost of Site C — double or triple the price of what would most likely be available on the market.

So, what is the alternative that the Minister said was 100% wrong? Very simply, it would be to do what is needed and not do what isn’t.

To ensure its ability to meet peak requirements, BC Hydro could very economically add peak generating capacity at the existing Revelstoke and GM Shrum hydroelectric stations. That is what the Review Panel explicitly suggested when it stated BC Hydro’s existing facilities could be sufficient to meet all requirements until 2028 or beyond. In addition, if needed, BC Hydro could very economically install single cycle gas turbine capacity. The gas turbines would not only be available to meet peak requirements, they could serve to back up the hydro system in the event of a severe drought.

Detailed system studies would be required to determine exactly how much BC Hydro would save relative to the government’s Site C plan, but rough calculations suggest the savings would be well in excess of $1 billion.

I agree with the Minister that Site C is a potentially very cost-effective long term source of electricity. But building it before it is required and fully justified serves only to reduce the advantage it may offer, and make more difficult the social and legal acceptance it will ultimately need to proceed.

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About the author

Marvin Shaffer is a consulting economist and adjunct professor in the Public Policy Program at Simon Fraser University. He has a PhD in Economics from the University of British Columbia and received his BA, Honours in Economics, from McGill University. Marvin has managed his own consulting firm specializing in energy, transportation and natural resource economics for over thirty years.

Marvin previously held senior positions with the Government of British Columbia (head of the Crown Corporations Secretariat and Chief Executive Officer of the British Columbia Transportation Financing Authority). As well, he lectured in economics at the University of British Columbia, and at the University of Queensland and University of Tasmania in Australia. Follow Marvin on Twitter